TyroCity: Business Studies XI Notes

Component of Business

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Scope of business
Business covers wide area and all economic activities. It also includes all types of industry and commerce. Industries are related to the activities of production of goods and services and commerce is related to distribution of goods and services from producers (industries) and customers.

Types of industries

1. Genetic industries:
Genetic industries are also called heredity industries that involve in production of goods from plants and animals to earn profit. Those industries which produce medicines from herbs, perfume from flowers, milk and meat form animals are called genetic industries

2. Extraction industries:
Industries that are involved in extracting the resources from the sources of nature are called extraction industries. It supplies the raw material to other industries. These types of industries are generally based in mining, fishing etc.

3. Construction industries:
Those types of industries which are related to construction of different infrastructures are called construction industries. They basically construct road, bridges, houses and so on . It helps in development of country

4. Manufacturing industry:
It is related to produce finished goods. It processes raw materials into finished goods. There are mainly 4 types of manufacturing industry they are:

Analytical industry:
It is an industry which produces goods by analyzing raw materials in scientific way. In this industry various goods ate purchased by single material. For example dairy product (milk, ghee, butter, ice cream from milk)
Processing industry:
The industry which is involved for production of goods and services by using different steps or stage is called processing industry. For example for processing cotton into thread the processes of spinning, weaving, dying, bleaching is used.
Synthetic industry:
The industry which is involved for using various raw materials to produce a single good is called synthetic industry. For example to produce cement limestone, red soil, chemicals etc are used.
Assembling industry:
The industry which is involved for production of goods by combining different parts which are already manufactures by different industries is called assembling industry. For example TV, computer, mobile, watch manufacturing industries.

Commerce:
It is related with buying, selling and exchanging of goods and services. It is related to economic activities to earn profit. The role of bridge between manufacturer and customer is played by commerce

Types of commerce

Trade:
Trade is related to buying and selling goods and services for earning profit. It supplies quality goods with reasonable price. Those activities which are related to buying, selling and distributing goods in market is known as trade

Types of trade

1. Home trade:
Home trade means national, domestic or internal trade i.e. Buying and selling within a nation. In home trade both buyer and seller are from the same nation. In home trade task is simple than foreign trade. It is classified into two types they are.

Wholesale trade:
When trader buy goods in bulk amount and resell to retail in small volume is called whole sale trade. In this trade goods are bought from manufacturer and are sold to retail. It acts as a middleman between manufacturer and retailer. It deals with special product
Retail trade:
When trader buy goods in bulk amount and resell to customer in small volume is called retail trade. In this trade goods are bought from wholesaler and are sold to customer. It acts as a middleman between wholesaler and customer. It deals with various types of product.

2. Foreign trade:
Foreign trade means international, global, external trade i.e. Buying and selling is between two or more nation. In foreign trade buyer and seller are from different nation. In foreign trade task is difficult than home trade. It is classified into three types they are.

Import:
A good or service brought into one country from another is called import. Along with exports, imports form the backbone of international trade. The higher the value of imports entering a country, compared to the value of exports, the more negative that country’s balance of trade becomes. Buying goods from India, china is called import.
Export:
A good or service sold to another country from one is called export. Along with imports, exports form the backbone of international trade. The higher the value of exports exiting a country, compared to the value of imports, the more positive that country’s balance of trade becomes. Exporting herbs, garments to Germany, India is the example of export
Entry port:
The trade in which a country purchases the goods from one country and sells it to another country is called entry port trade. The goods bought from a country is not used for self benefit but is rather exported to another country. For example India buys herbs from Nepal and sells it to china.

Auxiliaries of trade:
It supports or assists the trade activities. It helps to run business smoothly. It helps for transfer goods from production area to consumption area. It creates time and place utility.

1. Transportation:
It transfers goods from one place to another. There are many means of transportation that can assist business and trade activities. They are air travel. Bus route, sea route, rope route etc. It delivers right product and right time in right place. It creates time utility

2. Warehouse:
It is one of the auxiliary of trade. It helps to protect and store goods until customers uses them. It provides the goods then demand is created. It also helps to provide unseasonal goods.

3. Insurance:
It acts as nutrition to trading activities. It helps to reduce risk and uncertainties. It is a contract between organization and their future. The system that takes the responsibility of compensation of certain risk is called insurance system.

4. Banking:
Banks are the financial institution that supports for traders. It provides loan, investment, credits facilities to the trading companies. It helps for expansion and flexibility of trade.

5. Advertising:
It is a supporter to trade. It provides information to customer about goods and services. Its aim is for creation of demand. It also acts as a promotional tool.

Office machine : meaning and importance

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Office machine
The rapid increase in the industrial activities has increased office work to the highest level. The machines were invented to reduce monotony and increase the efficiency of works done. They help to save time and labor. In modern offices, business completely depends upon the office machine and equipment. It increases the level of operation, improves the performances, safeguards the files, and increases the accuracy. Purchase, repair and maintenance of office machines require big investment. It is the duty of office manager to select the right type of machine. If they don’t select it properly then the office work won’t be efficient and effective.

Importance of office machine

1. To save labor: properly designed office machine saves labor. It helps in saving labor cost. Machines work faster than men. Total wage bill can be reduced.

2. To save time: machines work faster than men. The office machine helps to save time. The speed of official work is increased with the help of machine. It helps in completion of work in a faster way. It increases efficiency and effectiveness of work.

3. To provide accuracy: office machines works accurately. It increases in accuracy in all types of works. It reduces the error, fatigue and helps in supervision

4. To reduce chance of fraud: there may be barrier inside the organization. Machines help to check for the accuracy and correct method of works done t also keeps systematic records of all employees. Thus, it helps in reducing the fraud

5. To retrieve monotony of work: some jobs are routine in nature. They are repetitive in nature. Repetitive works are monotonous. Office machine s help in retrieving the monotony of the employees

6. To improve quality of work: office machines help to maintain the neatness, accuracy and quality of work done.

7. To increase goodwill: when there is saving of labor and time and increment of accuracy of works done, then there are fewer chances of errors and fraud which improves the quality of work done and helps in satisfaction of customer and the employees. This helps in increasing the goodwill of the office

8. To lower operating cost: office machines reduce the operational cost. It helps to reduce the wage bill. It also helps in reducing the excessive filing cost.

Meaning of business letters

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

The letter which is drafted by a business organization is called business letter. Oral communication is not possible in everywhere. So, written communication is preferable for communication in business organization. Generally, it is written for making inquiry, giving reply, placing order, confirming an order, making complaint, adjusting complaint and collecting dues.

Qualities of good business letters

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Some qualities of good business letters are:

1. Clarity: in the process of communication, simple and clear language must be used. When the word is not familiar the meaning is not clear.

2. Integrity and sincerity: messages and information must be integrated to develop sense of sincerity to the receiver.

Time: the letter must be sent at right time to make it reliable and suitable at the present condition.
Correctness: the language used must be correct. In this informational letter, messages should be accurate with no spelling errors. There must be proper use of grammar.

3. Consistency: there must be consistent information so that there is no difficulty in communicating.

4. Informality: formal relations must be developed between sender and receiver but not in all situations. There should also be informal communication in terms of business dealings.

5. Completeness: incomplete communication system doesn’t provide the meaning of information ideas and other facts and incomplete organization and its department. Therefore, the message which is to be communicated must be adequate and complete.

6. Correctness: actual information must be provided to the receiver

Importance of an office

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Some importance of an office are as follows:

1. Information center
An office is an information center which provides information relating to business transactions. Such information is very useful. It is used by management for the purpose of planning, organizing, staffing, directing and controlling.

2. Channel of communication
Office not only keeps record of information but also plays the role of reliable channel of communicating the information. It is required for smooth functioning of the organization.

3. Coordinating center
The success of business depends on the proper coordination of people and activities of the organization. It keeps relations with all departments and deal with information necessary for effective coordination; it is a mechanism or coordination.

4. Control center
An office acts as a control center. Controlling is the important function of management. It helps to monitor plans and policies which help in the implementation of proper working environment. It helps to prevent from unwanted deviations. It provides data for managing and correcting deviations.

5. Service center
An office works as a service center. It provides services to all the department of an organization. It provides necessary information to all the department of an organization. Business cannot operate successfully without better service system and office fulfills this requirement.

6. Memory center
An office is the storehouse of records. It keeps the records of past and present. It provides necessary information for future. It helps to report letters, circulars, notifications, policies etc. It is known as ‘brain’ of organization.

7. Help employees
An office provides wages, salaries to their employees. They also keep records of workers attendance, leave due, provident fund, and calculation of overtime. They also help to maintain the relationship between management and workers.

8. Office as intermediary
An office works as a middleman between department and outsiders. It links with supplier, customers, shareholders, government and general public. These office activities enhance the image of the firm.

Functions and objectives of business

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Functions of Business

Organizing function:
It helps to organize all the activities. It organizes men, Machine, materials, money and methods. It performs different activities and all activities are organized properly

Financing function:
It is related to money. It helps in maximum utilization of resources. Bank is a financial company. All the activities related to money are defined in this function.

Production function:
The main function of business is to produce goods and commodities and transfer them to right place at right time. It helps to complete needs of human beings.

Distributing function:
It helps in the transfer of goods/services from producers to customers. It transfers right product at right time in right place.

Personnel function:
It deals with human activities. It is related o the utilization of people to perform different activities. It is also called staffing function. It helps in management of resources.

Managing function:
It helps in management of business. It includes planning, organizing, controlling, coordinating, decision-making and so on. It helps to make activities of people effective.

Research and development function:
It helps in improvement of product. It works under the taste, desire and preference of the customers. In it various marketing, strategies, skills, knowledge and experts are used. Research and development is the main way to achieve profit with customer satisfaction

Objectives of business

1. Economic objectives

The economic objectives are related to earning profit through customer satisfaction. It is to provide quality goods with reasonable price. Economic objectives can be defined in terms of money too. Some of the major economic objectives are:

Earning profit:
The main economic function of business is earning profit. It includes supply of quality goods and services to gain profit. T is done for the survival of business and it is also rewarded for the investors. It is required for expansion if business
Production of commodities:
Production of goods and services are to be done according to the customer demand and desired. Supply of commodities is also to be done according to needs of customer.
Creation of market:
Business can provide service only if demand of customers are fulfilled. When production is made according to the requirements of the customers then there is creation of new customer which creates new market. Creation of market helps in enlargement of production and promotes business expansion too
Technical improvement:
Use of modern technology is the base for successful operation o business. When modern tools, techniques and technologies are used then there is production of quality goods. Changes are the basic factor for flexibility and changes in terms of working methods is the main objective of business
Innovation:
New ideas, methods, men, tactics and technology create the ways of better production and services. It helps in survival of business too.

2. Social objectives

Business is operated in society and use resource available in society. This is known social objectives. It fulfills social expectation. All business operations are established in society, grow in society and fulfill all its expectation in society. Some of the major social objectives of business are:

Supply quality food:
It provides better quality of goods and services by charging reasonable price. It provides right product at right time in right place. It involves in fulfillment of social objective.
Utilizing resources:
A business house can’t continue its operation without utilizing the resources available in the society. But there must be proper utilization of resources and no any destruction in name of utilization. Maintenance of environment is must.
Providing employment:
There are many people in the society. Human needs are the basic need for operation of business. Many personnel are required dot fulfill the job of a business. Therefore, a business house without nepotism and favoritism must employ the human from the society and provide employment opportunities to the optimum level.
Avoiding social stigma:
Big industries are the cause of environmental pollution. Constant noise, smoke from the industries produces noise and air pollution. This is the social objective of the business to control pollution and wastages. There must be establishment of industries far from residential areas.

3. Human objectives
Human objectives are performed by different human activities. It is related with satisfaction of employees, investors and other personnel. Some of the major human objectives are

Satisfaction of employees:
The success of business depends on employees’ performance. It provides better working environment to satisfy the employees. It provides salary, bonus, provident funds and job security. It also provides financial and non financial supports.
Payment to creditors:
Creditors means supplier who supply goods and services. It is the objective to make duly payment. Satisfaction of creditors helps in further expansion of business.
Satisfaction of customers:
Production of goods and services are to be done according to the customer demand and desired. Supply of commodities is also to be done according to needs of customer. It provides better quality of goods and services by charging reasonable price
Satisfaction of shareholder:
It returns to investors the amount they have invested in business in the name of profit earn. They should be given reasonable returns of their investments. The objectives are to provide reasonable rate of return to shareholder. It also provides the information about plan of business.

Importance of Business

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

1. Economic development:
Business is important for economic development. Concept of true business is used in industries and commerce. Industries use men, money, materials, methods and machines and help to create employment. Commerce is the concept of exchange goods/services at national and international levels. It helps to earn foreign currency by export business too. Therefore, business helps in economic development

2. Utilizing natural resources
Every country has diverse natural resources. Business must be directed towards proper and efficient utilization of resources. Business utilizes the resources like water, minerals, ores and so to achieve its own goals. But resources must be utilized without exploitation.

3. Creation of utility:
Business creates place and time utility. It helps to satisfy the needs of human beings. Financial utility is to be maximized.

4. Employment:
Business helps to provide job to people. It provides various types of managerial or technical job. Many types of business houses like hotels, industries, and transport companies are established for business which helps to solve the unemployment problem.

5. Revenue generation:
Business is the source of revenue generation. It pays taxes, royalties, fees, custom duties, and other things which help to generate government revenue.

6. Earning foreign currency:
It is the source of earning foreign currency. Business can earn foreign currency through exporting the goods and services.

7. Development of country:
Development of industries helps to utilize natural resources, create time and place utility, provide employment opportunities, help in revenue generation and earning foreign currency. All these things help in the development of the economy of the country and the economic development is the major factor that can develop the nation to a wider sense.

8. Provide investment opportunities:
Establishment of new industries and commercial fields are the major source of investment. Further the profit owned by the investors after the successful operation of business helps to ensure larger amount of saving which can be invested in the newer future for pension of current business or establishment of newer business. Thus, business helps in providing investment opportunities.

9. International relations:
Business is the medium for development of national and international relationship. It helps to maintain harmonious relation among the various countries. There can be mutual understanding and better diplomatic relationship among the countries. Import and export is the major base for international relationship.

10. Self-sufficiency:
It helps in achieving countries and individuals self-sufficiency. It also helps in improving the living standard of people by reducing the dependency.

Concept of record management

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Concept of records
Records are the collective form of written data that are made for future use. They are the memory of the office record. Management is an art of handling and maintaining office records from the time of creation to the time of disposal. Office records are the informational documents used by the organization to carry out is major functions. It is also defines add the material and data prepared for future reference. It includes written papers, invoices, reports, vouchers, files etc.

Office furniture : meaning and importance

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Office furniture
Office furniture is an important part of office management; it is mostly used for indoor activity. Employees working in the office should be provided with comfortable and convenient furniture so that they can work efficiently. The major and most popular office furniture are chair, table, cabinets, cupboards, sofas, racks etc. office furniture are common in all offices. Office furniture should have good design which can help the office to look attractive ad pleasant. In a well furnished office, employees feel comfortable and are motivated for work

Importance of office furniture

It increases the efficiency of work
It makes the office more attractive and pleasant.
It helps to maintain the prestige of office
It provides better working environment for the employees
It helps in reducing the fatigue.
It helps in protection of documents from fire, dust, insects etc.
It helps in proper storage of files

Selection of Office Location

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Nearness to customer: The office should be accessible to customers. They do not like long distances to make business inquiries. The office should be accessible to other parties who are in regular contact.
Nearness to related business: It is desirable to locate the office near the offices of related business. It should be established in the same line of trade.
Availability of infrastructure: The infrastructure should be available in office location. It consists of transport, communication, power, water and parking facilities.
Nature of business: The nature of business affects location of office. Office of manufacturing business in located near the source of raw materials, labor and service facilities. Office of trading and banking business is located in commercial centers near the customers. Office of perishable goods business is located near the market for such goods.
Availability of human resources: Needed human resources should be available for office. They can be skilled, semi-skilled and unskilled. All facilities must be available for employees
Environment: The office location should have healthy environment. It should not be near polluted rivers or waste disposal sites. It should be free from noise, dust and pollution.
Cost of space: Sufficient space should be available at reasonable cost for the office. Space should be available for future expansion.
Government laws: The selection of location should comply with government laws and regulation at national and local levels.

Winding up of company

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Winding up of Joint Stock Company

Winding up of Joint Stock Company is the process of bringing the existence of the company to the end. It refers to the closure of business forever. In this time company being a legal person created by law can dissolve its own business in the following way:

1. By company registrar office

According to company act, registrar office may order winding up company under following condition:

If promoters of the company makes application showing reasons for failure to commence the business of company
If company is in default in submitting office return notice, information and facts to pay fine as required by the act

2. By voluntarily

In the following condition company can wind up;

Company has become insolvent with accordance with law on insolvency
Shareholders of company can wind up the company either by adopting special resolution in general meeting
If company is able to pay its debts and other liabilities in fault.
If directors of company have after due, company makes declaration in written form that the company is able to pay its debts or other liabilities in full.

Main documents for incorporation of joint stock company : memorandum, articles, prospectus

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Memorandum of association

It is the main document of the company. It defines the objectives, powers and its relationship with the outside world. The company works within the framework of the memorandum. The memorandum of association sets out the constitution of the company. It is so to speak, the charter of the company and provides the foundation on which the structure of the company is built. It enables persons who deal with the company to know its permitted range of activities.

The main content of memorandum of association are:

Name clause:
It includes about the name of the company. Name of the company should end with word ‘limited’ or ‘private limited’. Care should be taken while enclosing name of the company. The names that already registered should not be used. Change in name of the company requires special resolution and approval from the concerned department.

Situation clause:
It is also dominant clause. It must have registered office. All the official communication may be sent by concerned office or other organizations in a specified location. Therefore, there is need to maintain registered office location. Once the location is set then it is very difficult to change the location.

Object clause:
It is important part of memorandum. It must clearly state the objective of the company for which it was established. It informs the members about the objectives. It can carry out only those activities which meet the objectives in the memorandum.

Functional clause:
It includes the functions of the objectives of the company. It should be within the objectives.

Capital clause:
It includes the amount of authorized capital which can be utilized by the company. It includes the amount of share capital and the considerations of issuing and subscribing the share capital. It must include the nature of shares and face value of share with the prices of shares.

Liability clause:
Memorandum must clearly state that the liability of shareholders up to the extent of face value of shares. In company limited by guarantee it must state the guarantee sum too.

Association and subscription clause:
It states that the member themselves agreed to organize and carry out business. In case of private company at least one signature from promoter and in case of public company at least 7 signatures is needed.

Agreement clause:
According to company act 2063, clause 18.p., public company is desired to do following things.

If promoter or any other partner is entitled to subscribe share, they must pay in each.
If Company is to enquire any property from promoter at the time of commencement of its transaction.
If Company itself is to bear expenses incurred on the corporation.

Articles of association

It is another important document of company. The document which defines the rights, powers and duties of the management, the modes and manners of carrying the company’s business, is called articles of association. It shows the relation between the company and its members and relation among the members. It is subordinate to memorandum. The information related is:

1. Director related

Number of directors
Provision of alternative directors
Minimum number of shares to be directors of the company
In case of public company, qualification and number of independent directors
Power and duties of BOD
Authorities of directors
Delegation of authority
Provisions relating salary, allowances and facilities of directors

2. Meeting related

Procedure for conducting general meeting and notice for such meeting
Provision relating to decisions of general meeting and BOD and duplicate copies and inspection
Quorum for meeting of BOD, notice and proceeding of meeting.

3. Share related

Right, powers and restriction attached to share
Provision relating to transferability of share
Matters on altering the authorized share capital
Matter of forfeiture and reissue of share.

4. Other particulars

Appointment of company’s secretary
Account books and audits of the company
Provision on power to raise the loans

Prospectus
It is an invitation to the public to purchase shares or debentures of the company. Any circular, advertisement, offer or any other document by which a company gives invitation to the public to subscribe to its shares and debentures is known as prospectus. According to the company act 2063, the prospectus contains the following matters.

Information related to management and the objectives of the company
The number of shares to the subscribed by directors and the cash to be received from them.
Capital structure of the company divided into authorized, issued, subscribed and paid up share capital.
Terms and mode of payment, issue of shares on discount or premium
Details about brokerage, underwriting commission and preliminary expenses.
Estimated expenditures for the company and estimated income at least for coming 3 years.
Other necessary particulars.